Exponential Moving Average (EMA - Exponential Moving Average) The exponential moving average is an average of data weighting decreases exponentionellement, recent data have more weight than older data.
Characteristic The weighting applied to the most recent price depends on the period is calculated exponential moving average (EMA). The shorter the period chosen, the greater the weight applied to the most recent price, choosing the right time period for the EMA is explained in the neatest little guide to stock market investing in plain english that even a beginner can understand.
An EMA can be configured in two ways: as a percentage, in this case the analyst establishes a degree of decrease in weight for each observation, or number of periods in which case, the analyst specifies the duration of the EMA and the weighting of each period is calculated by a formula. The latter method is the most commonly used. * Advantages compared to the Simple Moving Average
Because it is more sensitive to the most recent data, the Exponential Moving Average techniques allows traders to react more quickly to price changes. Unlike the simple moving average, each new computing Exponential Moving Average (EMA) said the effect of the latest observation, without abandoning the older. Although the impact of data points decreases as the oldest and when it never disappears entirely.This is true regardless of the calculation period EMA. The impact of older data diminish rapidly for short period EMA on EMA in comparison to longer, but, again, it never disappears completely.
The Convergence-Divergence Moving Averages (MACD) The convergence-divergence indicator moving averages (MACD) is used to detect signals of accelerating trend. MACD stands for Moving Average Convergence English discrepancy. Calculation The MACD indicator is calculated by subtracting the two exponential moving averages of different period: the first short duration and the second longest. There are sevreral other methods of computing the MACD highlighted in the neatest little guide to stock market investing, but this one is the most often used method. Periods usually used to calculate the MACD indicator exponential moving averages of 12 days and 26 days.
From this difference, a simple moving average of 9 periods is calculated, which is called "signal line. MACD = [moving average 12 days - 26 days moving average]> Indicator Exponential Weighting In Interpretation Because of the exponential smoothing, the MACD indicator will react more quickly to price changes in stocks as the signal line. Therefore:
When the MACD crosses the signal line: moving average short-period (12 days) evolves faster than the moving average long period (26 days). It is a buy signal, suggesting that the price will probably experience an acceleration upward. Conversely when the MACD moving in the SIGNAL ONLINE: it is a bearish signal which portends an impending downturn.